STORM AND CRISIS: THE ACQUISITION; Capital One Lowers Its Purchase Price for Bank Based in New Orleans

Published: September 8, 2005

Capital One Financial said yesterday that it reduced the price of its planned purchase of the New Orleans-based Hibernia Corporation by 7.6 percent, to $5 billion, after Hurricane Katrina left a fifth of Hibernia's branches in the affected area with ''significant damage.''

Hibernia investors will receive $30.49 a share in cash and stock, down from $33. The companies delayed the deal's completion and will put the revised terms to a new vote by Hibernia shareholders, they said in a statement.

Katrina, which left 80 percent of New Orleans under water, affected a third of Hibernia's 321 branches, and the bank, Louisiana's biggest, has reopened only 47 since the storm hit last week. Capital One expects to complete the transaction in the fourth quarter.

''I view it as a good compromise,'' said Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners in New York who has a buy rating on Hibernia and does not own shares of the bank. ''Capital One is able to appease their shareholders while at the same time being sensitive to the Hibernia shareholders and the long-term value of that franchise.''

Shares of Hibernia fell $1.54, or 4.9 percent, to $29.86 in New York Stock Exchange trading. Capital One declined $1.05, to $79.45.

No date has been set for the new shareholder vote, a Capital One spokeswoman, Julie Rakes, said. Hibernia must first send a revised proxy statement to its shareholders. A Hibernia spokesman, Steven Thorpe, did not answer calls to a temporary office in Texas seeking comment.

The prior terms were approved by a margin of more than 94 percent of the votes cast at an Aug. 3 Hibernia shareholder meeting.

The companies assessed the impact of Katrina on Hibernia's branches and headquarters in New Orleans, its loan portfolio, and future prospects, including government aid and insurance proceeds, they said in the statement.

''While no one can predict the impact of Katrina with certainty, I remain convinced of the strategic value of this transaction and believe that Hibernia is well positioned to grow and generate significant shareholder value over time,'' Capital One's chief executive, Richard D. Fairbank, said in the statement.

Ms. Rakes, the Capital One spokeswoman, declined to comment further on how the companies arrived at the $350 million price reduction. The companies made independent assessments, said Tatiana Stead, another Capital One spokeswoman.

Capital One, which is based in McLean, Va., wants to acquire a bank to expand its financial services and reduce the cost of financing its credit card operations.

Under the revised terms, Capital One would swap 0.2055 share and $13.95 for each share of Hibernia, down from the 0.2261 share and $15.35 it agreed to pay March 6. About $2.2 billion of the new purchase price would be cash, compared with $2.4 billion previously.

About two-thirds of Hibernia's branches are in Louisiana; most of the rest are in Texas. Hibernia has $22.1 billion in assets.

Photo: A soldier from the Army on guard at a Hibernia branch in Bogalusa, La., on Tuesday. About a third of the company's 321 branches were affected by the storm, and about a fifth of them were significantly damaged. (Photo by Douglas Collier/The Town Talk via Associated Press)